Invest3 publishers2 min readPublished
Strategy's $139 million preferred buyback captured about $2.7 million of discount to par
Strategy's second straight week of buying its own preferreds cost $139.3 million and captured roughly $2.74 million of discount to the $100 stated value. The cash pool that funded it held $1.30 billion on September 13.
The Investor · Invest desk
What happened
- An 8-K filed on September 14 shows Strategy spent $139.3 million buying back its own STRC preferred stock during the week of September 8 to 13.
- Its bitcoin holdings sat at 845,050 coins for a third straight week, unchanged since the 4,603 coins bought for nearly $370 million disclosed on August 31.
- STRC last closed at $98.64, under the $100 stated value, and management counts repurchases below that mark as accretive because they cancel future dividend obligations.
- The money came from the USD Cash pool, which held $1.30 billion on September 13, separate from the $5.10 billion USD Reserve earmarked for preferred dividends and debt interest.
- The filing leaves $1.05 billion available under the doubled $2 billion preferred repurchase ceiling and $1.0 billion authorised against MSTR common stock.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- constraint At last week's rate the flexible dollar pool funds roughly nine more weeks of preferred buying, so sustaining it requires either new issuance or a raid on the dividend reserve.
- decision The same cash now has three authorised uses: coins near the implied mark, discounted preferreds, or the $1.0 billion earmarked for common at $130.97.
- exposure STRC holders are told they hold senior credit with no direct claim on the coins, and those coins are about 3.6% above what Strategy paid for them.
- precedent The company at the top of a 197-name list of public bitcoin accumulators has spent two weeks retiring its own paper, which gives every imitator a template for what to do at a discount.
The week before, Strategy paid $176.3 million for 1,810,885 STRC shares, an average of $97.36 [13][3]. The latest 1,420,467 shares came out at $98.07 [2][1]. So the price is rising as the discount closes, by 71 cents a share in a week [4], and the $1.93 gap to the $100 stated value is worth about $2.74 million on the week, or 1.97 cents on every dollar spent [2].
Two weeks of this comes to $315.6 million [5], all of it out of the flexible dollar pool [11]. At $139.3 million a week that pool covers about nine more weeks [7]. The bigger reserve, $5.10 billion, is 3.9 times its size and earmarked for preferred dividends and debt interest [12][11]. Across the same two weeks Strategy sold nothing under its at-the-market equity program and left MSTR common alone [9].
The case for buying paper instead of coins sits in the marks. Bitcoin Treasuries puts the 845,050 coins at about $66 billion against $63.73 billion of cost, roughly 3.6% above the average $75,412 paid [10][9], which implies about $78,100 a coin [8]. Saylor's own credit dashboard runs on an assumed bitcoin price of $77,266, about 2.5% over that average cost [15][14]; he posted on September 14 that STRC's "BTC Credit" stood at 57 basis points and its USD duration at 3.9 years [15].
Set against the balance sheet the buyback is small. At that implied mark, $139.3 million is about 1,780 coins, a fifth of a percent of the stack [10]. As a use of the week's cash it was the only move Strategy made [1][3]. The company has now skipped a bitcoin purchase in 13 of the last 14 weeks [12].
I read this as a defence of the $100 figure on a security sold as senior, short-duration credit with no direct claim on the coins [8]. The discount piece of the accretion is thin at about 2% of the outlay, and the rest depends on the dividends the retired shares no longer collect [2][7]. The counter is simpler and may well win: at a $98.64 last close there is barely a discount left [6], the average paid climbed 71 cents in seven days [4], and $950 million of the doubled $2 billion ceiling is already spent [6].
What to watch
- Where STRC trades against $100 in coming weeks, since the discount is what management calls accretive.
- The USD Cash line in the next 8-K, against the $1.30 billion reported for September 13.
- Whether the $1.0 billion authorised for MSTR common repurchases gets drawn at all.